MARKET TREND: There continues to be serious concern over the compensation of certain public company executives. The SEC’s proposed rules, stemming from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, attempt to address the matter.

SYNOPSIS: The SEC’s proposed rules define the issuers and executives to whom a compensation recovery policy must apply. These rules specify the circumstances in which the recovery policy would be triggered, the compensation subject to recovery, and the methodology for determining the recoverable amounts.

TAKE AWAYS: Listed (public company) issuers should review their existing clawback policies in light of the proposed rules. While well-accepted compensation theories advocate tying compensation to a company’s financial performance, given the SEC’s proposed rules and the current market trend, issuers may wish to reduce the amount of compensation that is contingent upon the satisfaction of financial reporting measures, so as to reduce their executive officers’ exposure to clawback. To the extent that compensation will be based on the achievement of financial reporting measures, per the proposed rules, the compensation awards should include explicit language to facilitate clawback, if required.

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​Effective June 9, 2017, all individuals who provide advice to retirement plans, including Individual Retirement Accounts (IRAs), must abide by the fiduciary standard. What does the fiduciary standard mean? This means that your advisor must put your interests first before their own or that of the firm, make prudent recommendations, charge reasonable compensation and make no misrepresentations to you regarding recommended investments. The recommendations made by your advisor must be based upon your specific investment needs and objectives. The fiduciary standard is applicable to any recommendations that your advisor makes to you, the client, for your retirement account.

Please note the firm does have policies and procedures in place to monitor this level of fiduciary responsibility for our clients.

IZALE Financial Group does insurance business in California as IZALE LLC Insurance Agency

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